North Asia Investment (NYSE AMEX:NHR)

As we speculated on NHR announced a proposed business combination.

Target Company:

Pac City is a bank holding company

Pac City is a bank holding company, headquartered in Los Angeles, California, that conducts its operations through Pacific City Bank, a California state-chartered bank. As of , Pac City had total assets of $534 million and total equity of $54 million, including $16 million of preferred equity under the TARP program. NAIC is a special purpose acquisition company incorporated in the Cayman Islands with $50 million of cash-in-trust. The senior management of Pac City will remain in their respective management positions following the Merger. In addition, Thomas C. Kang, Chief Executive Officer of NAIC, is expected to become Chairman of Pac City's Board of Directors.

Source: PR Newswire (January 12, 2010 - 8:01 AM EST)

Possible arbitrage strategy if shareholders approve the proposed business combination

Data to be considered:

• Current Price of Common Stock: $9.90
• Current Ask Price of Warrants: $0.55 (warrants have a wide bid/ask spread)
• Strike price of Warrants: $7.50
• Implied intrinsic value of warrants: $9.90 - $7.50= $2.40

Strategy

• Buy the warrants at current price of $0.55.
• If the business combination is completed and the warrants become exercisable then the warrants should approach the implied intrinsic value.
• Profit = (New Value of Warrant, Properly Priced) minus $0.55.

The GeoTeam® is tracking North Asia Investment developments.

• The Chief Executive Officer and a member of the Board of Directors Kang is reviewing and analyzing potential business combination transactions for the Issuer.
• Kang beneficially holds Sponsors’ Warrants to purchase 2,455,000 Ordinary Shares, which are not currently exercisable and will not become exercisable within 60 days
• On December 21, 2009 Kang purchased 1,000,000 Ordinary Shares from Kang & Company in a and 613,750 Sponsors’ Warrants from Mr. Morrison, Chairman of the Board in private transactions.

Significance of these details:

It seems like the CFO may be buying the shares of entities who could be opposing the SPAC's existence. Doing this will ensure more YES votes in the event that a business combination is proposed.  We are wondering if the CFO may actually have an acquisition in mind that certain shareholders are not in favor of consummating.

Warrants exist with an exercise price of $7.50